Little inflation boost likely from shutdown of wage-price guidelines
The end of the Council on Wage and Price Stability (COWPS) is not expected to set off new and strong inflationary increases in pay and living costs. Economic conditions and high unemployment probably will be as effective as guideline policies in controlling both.
President Reagan abolished the COWPS on Jan. 29 and with it ended the controversial monitoring of wage and price increases and efforts to win "voluntary compliance" with guidelines for noninflationary increases.
The order surprised nobody. The agency had released the final evaluation of its work in mid-January, conceding that the guidelines program appeared to be a "dismal failure" as a mechanism for controlling inflation. The best that it could say was that the propram "merits some commendation for preventing a bad situation from becoming even worse."
The end of controls is likely to set off a wave of demands for catch-up increases by workers who lack cost-of-living protection -- the adjustment of wages to higher prices at regular intervals. The guideline's rules enable workers with protective clauses to realize significantly larger gains annually than those without wage guarantees.
Otherwise, the end of the COWPS is not likely to affect bargaining by major unions this year. Although workers' real income has been falling since 1978, and is expected to continue dropping in 1981, labor militancy is relatively low. In the first 11 months of 1980 only 1.5 million workers were involved in strikes; that labor peace is expected to continue this year. High unemployment has curbed the willingness of union members to strike.There is now more concern about keeping jobs than for an all- out fight to keep up with the nation's inflation rate.
Bargaining will be light this year. Only 2.5 million workers are covered by labor contracts that expire, comparef with 3.7 million last year and 4.2 million in 1979. Generally, the unions involved are in a poor position for militant bargaining.
The result may be a pattern of negotiated wage increases of about 10 percent this year, in line with those under contracts reached in bargaining under the controls program in 1980.
In the important United Mine Workers bargaining, now under way, hourly pay is less an issue than income security for the future (a cost-of-living clause) and job and pension protection. Neither coal management nor the union expect bargaining to be any different without the guidelines.
Other major bargaining will be in railroad, airline, construction, and retail food industries. High unemployment and nonunion competition can be expected to temper demands and cur b militancy.